Market Report: Traders point to Davos summit as insurers rise
Friday 28 January 2011
The insurers dominated the top line after surging in the afternoon, with traders speculating that the move was linked to a meeting at the World Economic Forum in Davos.
There had been some head-scratching across the City over the sector's strength but several traders said they were hearing positive noises leaking from a meeting between UK insurance and banking executives and US Treasury Secretary Tim Geithner. Shares in Prudential, whose chief executive, Tidjane Thiam, attended the meeting, closed up 20.5p to 704p, but top of the pile was Old Mutual, which rose 5.7p to 131.1p.
The miners also enjoyed a strong session, following updates and broker support from Citi in a sector note. Randgold Resources was up after HSBC upgraded its rating from "neutral" to "overweight", saying the stock was undervalued after "recent disappointments", adding: "We believe the shares are oversold, opening a buying opportunity." It closed 70p up at 4809p. Elsewhere in the sector, Kazakhmys rose 8p to 1541p as it said copper production would meet full-year targets, while zinc and silver production would be better than expected. Evolution Securities upped its rating from "reduce" to "add".
The FTSE 100 struggled for direction throughout the day, closing down an almost apologetic 4.1 points at 5965.
On the downside, shoppers deserted Next over negative readacross from poor results at Sweden's H&M chain, which said it had been hit by the rise in cost of raw materials. Earlier this month, Next said sales had fallen in the run-up to Christmas and, along with a host of other retailers, said prices could rise up to 10 per cent this year. The shares dropped 47p to close at 2028p. It has been a topsy-turvy week for the stock, which plunged on Tuesday in the wake of the shock fall in fourth-quarter GDP in Britain, but rallied the following day after support from Nomura, which upped its rating from "neutral" to "buy".
On the second line, Heritage Oil picked itself up, dusted itself down and recovered some of its losses from the previous day, when it gave up almost a third of its value. Arbuthnot said Wednesday's gas find in Iraq was "a very different proposition for both Heritage and the investment community" from the oil that had been expected. The broker said it was sceptical over the global gas market, which the International Energy Agency has said will be oversupplied to 2020, advising that Heritage should sell its interest in the field. Other analysts said investors had overreacted, and the stock recovered 6.5 per cent yesterday, rising 20.3p to 330.3p.
Also toasted on the FTSE 250 was pub and restaurant group Mitchells & Butlers, after the market welcomed its interim management statement. The stock increased 14.2p to 357p as it revealed punters had flocked to its joints – which include Harvester and All Bar One – over Christmas.
The worst performer on the index, showing a distinct lack of "MMMBop", was Hansen Transmissions as it confirmed revenues would be a tenth lower than in 2010. The company, which makes gearboxes for wind turbines, said it has been hit by a cut to government subsidies and third-party financing for the wind industry. Its shares plunged in October, when the company first revealed it would miss targets. It was down 3p yesterday to 54p.
In the wider market, Hansard Global was among the top small-cap risers, increasing 7p to 170p. The financial company, which specialises in the life assurance sector, was in favour after new business revenues soared by half in the second quarter to £62.7m. This was helped by a doubling of business won in the Far East.
Another solid performer was Eaga, the outsourcing company that is one of the largest national suppliers of heating and renewable energy. The 3p boost to bring the shares to 74.5p came despite the company missing market expectations in the first half. Profits halved and revenues were down 21 per cent as the Government's spending cuts kicked in. Yet investors were happy as the group said negotiations with the Department of Energy were ongoing, and the business had started the second half of the year well.
At the other end of the table was Severfield-Rowen, after it warned on profits. The UK steel group said falling demand coupled with soaring house prices meant profits would miss full-year expectations. The shares plunged almost a fifth, 55.75p lower, to 240p. Broker Altium responded by dropping its recommendation from a "buy" to "hold", while KBC Peel Hunt dropped its target price by 30p to 330p.
Tiddler Fyffes was looking as fruity as a Carmen Miranda hat on Aim yesterday after it bought a 33.3 per cent stake in Fruchtimport vanWylick, a German fresh-produce distributor. The Irish fruit company said the move would be earnings-enhancing this year and represented an important move as it looked to expand in Germany. The shares rose 8 per cent, or 2.75p, to close at 36.75p.
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